5) 6) True or False 1) The budget process starts with the sales forecast because sales volumes determine the production plan. 2) McGraw-Hill publishes a new edition to a textbook which will reduce sales of earlier editions. The lost sales on the older edition are a sunk cost and is not considered in the cash flow projections for the new edition 3) Changes in depreciation will not have an effect on the cash flow of a company. 4) The internal rate of return is the discount rate that equates the present value of the cash outflows (or costs) with the present value of the cash inflows. 5 The salvage value of equipment for a project is irrelevant for capital budgeting purposes if the salvage value is equal to the equipment's net book value at the end of the project (i.c., when it is disposed of). 6) _If an investment project makes use of land which the firm currently owns, the original cost of the land should be considered as a cost of the project, even if the land's current market value is higher 7) Giving customers more time to pay their bills (longer payment terms) will usually improve cash flow. 8) Fully utilizing your credit card limit will improve your FICO credit score. 9) According to the article on Capital Budgeting, The IRR method is more popular than the NPV method. 10). _An increase in the accounts payable will improve a firm's cash flow. 11) An increase in assets (no change in net income) will improve the firm's Return on Assets (ROA), 12). _Dividends decrease owner's equity which will increase the firm's debt/equity ratio. 13) _An increase in inventory will improve a firm's cash flow. 14) _If the yield curve is upward sloping and is expected to remain constant in the future (no change in rates), it is better to borrow for a longer-term in order to lock in the interest rate. _You will pay less income taxes if you have more dependents. _You will pay less FICA taxes if you have more dependents. Having a low FICO score could make it difficult to get security clearance for certain jobs. 18) LA person in the 15% income tax bracket will pay incomes taxes equal to 15% of her income. 19) _Trading in options is a risky investment alternative. 15) 16) 17) 20) In 1-2 sentences, explain the differences between a Roth IRA and a Traditional IRA